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Does Starbucks Have More Room to Grow Internationally?

By Matthew Frankel, CFP® and Brian Withers - Feb 10, 2021 at 7:18AM

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Starbucks has a massive presence in the U.S. and China, but are there other opportunities to expand?

Starbucks (SBUX 8.15%) is still growing in the United States and China, its two biggest markets, but the growth isn't nearly as rapid as it once was.

However, with about three-fourths of revenue coming from those two markets, is there room for international expansion elsewhere? In this Fool Live video clip recorded on Jan. 28, contributors Matt Frankel, CFP, and Brian Withers discussed Starbucks' competitive landscape in China and around the world. 

Matthew Frankel: So, Starbucks in China? Does Luckin Coffee (LKNC.Y 8.89%) have any impact? Also general overall international outlook. The Luckin Coffee question. Regardless of what you think is the stock, the stock was a complete disaster. There was the accounting scandal and all that that really drove the stock down. I would say that Luckin and Starbucks compete in different markets. I'd consider Luckin more of a competitor to like a Dunkin' Donuts (DNKN) level of coffee shop. They're more than mid-range consumer, whereas Starbucks targets the higher end market. People love gourmet coffee drinks, things like that, where Luckin is more of the middle market. I'd say that it's not exactly an apples-to-apples comparison. It's like comparing Starbucks with Dunkin' Donuts. Like yeah, they take some business from them, but it's not to where they're competing for market share directly as much as you might think. As far as the rest of their international outlook, curious to what Brian think it is. But you said most of their business is U.S. and China, I think you said about three-quarters?

Brian Withers: Yeah.

Frankel: I would have to think that the rest of the world is a pretty big growth opportunity still.

Withers: Yeah. Looking at the international business, it's $1.6 billion or almost $1.7 billion this quarter, $900 million of that is China. I know Jason Hall last night talked about how China is more company-owned stores, whereas Europe is more franchise stores. I think they're going to pull in more revenue. It's just going to look different. Franchise, you get the franchise fees versus China where you're getting the full complement of drinks and whatnot, so it's a little bit different to look at. But the overall international comparable sales for 2021, they're projected to be 25-30% growth. China is two points better on both the low end and the high end of that. Certainly, the international is significantly higher than the U.S. and the Americas.

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Stocks Mentioned

Starbucks Corporation Stock Quote
Starbucks Corporation
$75.60 (8.15%) $5.70
Dunkin' Brands Group, Inc. Stock Quote
Dunkin' Brands Group, Inc.
Luckin Coffee Inc. Stock Quote
Luckin Coffee Inc.
$7.84 (8.89%) $0.64

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